EntreLeadership - How to Do More Than Just Break Even in Business

Episode Date: August 7, 2023

Today we’ll hear about: •       The things to keep in mind when deciding if you’re going to sell your business •       The best formula to estimate the value of a business when buying one •       How a business owner’s salary may be putting the future of his business in jeopardy  •       What to pay attention to when you have minimal profit margins and how to turn that around Links mentioned in this episode: •       The EntreLeadership Podcast •       EntreLeadership Master Series •       Have a question for The EntreLeadership Podcast? Leave a voicemail at 844.944.1070 or submit your question for a chance to be on the show with Dave Ramsey: https://www.entreleadership.com/ask Start growing in business and leadership with the EntreLeadership Newsletter. Sign up to receive tactical tools, advice and resources in your inbox every week: https://bit.ly/3IRWnsL   Support our sponsors: •       NetSuite •       BELAY •       Payority Learn more about EntreLeadership Events: •       EntreLeadership Summit •       EntreLeadership Master Series Learn more about EntreLeadership Coaching: •       Elite •       Advisory Groups •       Executive Coaching •       Workshops Listen to all the Ramsey Network podcasts anytime, anywhere in our Ramsey Network app: https://apple.co/3eN8jNq Learn more about your ad choices: https://www.megaphone.fm/adchoices Ramsey Solutions Privacy Policy: https://www.ramseysolutions.com/company/policies/privacy-policy Learn more about your ad choices. Visit megaphone.fm/adchoices

From the headquarters of Ramsey Solutions, this is the Entree Leadership podcast, where I take calls from leaders like you about what it takes to win at any stage of business and leadership. I'm Dave Ramsey, your host. I've got over 30 years experience actually doing this stuff in the trenches. This is not theory for me. I've done it all day long today before I sat down in front of this microphone. So we're glad you're here. Thanks for being with us. Regardless of your stage of business, regardless of what you're doing, we're here to help you. And this is a practitioner. We don't do theory around here. We can discuss theory, but we actually make payroll. And we actually have cash flow.

And we actually have all the things that you're trying to do when you're running a business. We have all the problems, the drama, the hyperbole, the whole bit. And we're here to help. If you want to participate in this show, it is call in these days. That's what we're doing. Most of our stuff is call in anyway. Call and leave a voicemail. We'll set you up to be a caller on the show.

844-9-44-1070, 8449-4-1070, leave a voicemail. Or you can go to the website and leave a little bit about your question. We'll get back to you and set the call up. We don't tell you what to say. We just tell you when we're going to call you and be ready. There you go. Entreleadership.com slash ask is the website. Thanks for joining us.

Entreleadership.com slash ask. Crystal's going to start today off in Richmond, Virginia. Hi, Crystal. Welcome to the Entree Leadership Podcast. Hi, Dave Ramsey. Thank you very much for taking the call. Oh, well, I'm honored. What's up? Well, I am in Baby Step 6, and I'm just about ready to pay off my house. I'm very happy about that.

Good. And I'm trying to utilize these steps in my business. So I own a consulting business that averages an annual revenue of $600,000. I bring in 50% of the sales, and I manage a team of five people. one other salesperson and four admins. I think I've grown my business to the maximum point of my abilities and what our team can handle. I'm wondering if I should sell my business to someone who can make the business even more successful and take it to the next level and I keep my position in sales,

or should I try to hire someone and teach them how to do my business and do the sales, and I figure out how to take my business onto the next level. I've been doing this for 15 years, and it's starting to wear on me now. I thought I would be way better off than I am, so I'm wondering what I should do now. Okay. Well, you've identified that your logjam is you, and we have to replace you in sales and move you into leadership if you're going to grow the business. If you're not going to do that and you want to be in sales, then yeah, you probably should work for someone. So the question is, what do you want to do?

Do you want to run the business and go on and let someone do what you're doing? One of the things we have to do in all of us need to do in our careers, but we for sure have to do it as entrepreneurs is constantly be replacing ourselves. Right. What do you want to do? Depends on the day, right? You know, being a business owner is so wonderful and it has wonderful advantages, but it's very tiring.

It's hard to wear all of the hats and still make time for your personal life and enjoy life. And I'm not really doing good at balancing personal and work. So sometimes I think maybe I should sell it. And then I could just be a salesperson and still kind of control my income, I guess, you know? Well, you've always got a boss. You've just got to decide who it is. When you own the business, the boss is the group of people. people we call customers, not a single customer, but the group of people. We're having a conversation

with the marketplace, and the marketplace says, you suck, you're fired, or the marketplace says you're awesome, here's some profit, because we love what you do, and you're doing more and more of it, so we're going to give you more and more profit. And so that's your boss. That's my boss right now, and has been for a very long time. So you just have to choose that, and in either case, you have to learn to set boundaries. Now, I will tell you that as I've grown this business, and it sounds like you're stalled out probably around a Pathfinder or maybe even Trailblazer stage. And as I've grown this business, what I've discovered is that my life got easier and more in balance, the more people I hired to do work I didn't want to do.

Okay. That makes sense. So, you know, you know, you don't mind doing the sales, but you've recognized now that doing the sales, is keeping you from being able to grow the business because you are the lid on the business, as John Maxwell would say. And so what we've got to do is you've got to say, all right, I am going to systematically, no panic.

It's been 15 years, so no panic, but systematically over the next 12 to 24 months, I'm going to put two people in the seat to replace the work I'm doing in sales for two reasons. One is you're probably not going to find somebody as good as you, two is one I'm going to work out anyway and you're going to get to do it again. Okay. So you probably already figured that part out, right?

I've been through a few, yes. And that's kind of where I'm like, do I keep trying to find that perfect person? No, no, we replace you with two. Okay. For two reasons. One is they're not going to be as productive and as excellent because you've been doing this longer than the person you hire is going to be doing it. And you're going to pay them less, too, by the way, than you get paid.

So, and, you know, you're going to lose one of them for whatever reason, and you can't be so dependent. So we're going to replace that. And oh, by the way, when they get full up, we're going to go ahead and hire another one. When they get full up, we're going to go ahead and hire another one. It's growing the business. Your salespeople are your revenue source. So we want to grow revenue. We're going to grow it with salespeople.

And then you've got to, of course, grow production on the other end. You're doing consulting, so you've got to have enough people to do the consulting and train them. And so, but it takes a little while to, uh, uh, I'm going to send you a copy of a little quick read I did on delegation, all right? Okay. And that little book is like a chapter almost, a little more than a chapter book, is like 30 pages or something, 40 pages. And the point of delegation is you should not turn loose of something

until you're confident that the person you're turning it loose to is competent and you can trust their integrity. You trust their competency and their integrity. When you can do that, it is one of the most soul. enriching, fun things you'll ever do in business is to build a team that you can delegate to and turn your back and walk away and they do it the way you would want it done in a way that protects your brand, serves your customer, brings profit into the house. It's a coolest thing ever. But it is a lengthy process to do it properly. We don't hire a warm body with a title on

their resume and hand them the keys to the thing and walk away. No, we're giving them our dadgum new Ferrari. We want to make sure they can drive. And so we're going to have some driving lessons, and I'm going to drive around, show them how to do it. Then I'm going to ride in the passenger seat, talk to them about what they're doing wrong. I want to show them how to shift and how to take the corner. We're going to do this right. And then after I'm so comfortable that you're almost as good as me, then I'll turn you loose with this thing called my life that I've poured my life into, this thing called business at that point.

And that's what I want you to do. So hang on the line, Crystal. We'll have the team pick up and get you a copy of the quick read on delegation. This is the Entree Leadership Podcast. Okay, there's five stages of business. The treadmill operator to the Pathfinder, to the Trailblazer, to the Peak Performer, to the Legacy Builder. This is the Entree Leadership podcast. I'm your host, Dave Ramsey.

I was telling Crystal that she is in, seem to be stuck in the Trailblazer stage. The primary problem if you're a Trailblazer is you lack the lack. leaders and the plan to scale your business. So some things you've got to do, you've got to build a strong leadership team, you've got to create a desired future dashboard, you start having annual and quarterly planning, and you document core processes like hiring, and in her case, like sales. This is a core process. It's so core to her business that she's personally handling 50% of it. That's why I declared her to be at the Trailblazer stage, which is the middle stage of the five stages of business. So as we talk about these stages of business, it's the roadmap that's

going to help you grow your business. And I hope you're paying attention because they're going to help you accelerate your growth like you wouldn't believe once you understand what the attributes of them are and what you do to level up to the next stage. And if you're a business owner and you're trying to level up, you're going to need more than just a high level summary that we get here on the podcast. You need to come to Entre Leadership Master Series. This conference is a five-day meat and potatoes tactical, not aspirational. It's motivational, but it's motivational because we're going to show you exactly what to do, crash course on how to grow a business. We're going to break down the skills you need to advance through the stages of business. Stuff like delegation, like I was talking to her about, hiring, strategic planning, every bit of it. The best part is, none of its theory. All these lessons are taken from what we've learned at Ramsey from the treadmill operator stage all the way to the legacy builder stage.

I've done every bit of this over the last 30, 35 years. There's so much to talk about. We've even added an extra day of the conference this year. It's happening November 5th through the 10th here at our headquarters in Nashville. You do not want to miss it. We are very close to being sold out, and you're getting ready to enter FOMO mode if you don't get your ticket. Yep, fear of missing out is going to come true. So you do want to go and get your tickets now.

Go to Entreeleadership.com slash master series and get your tickets. Skyler is up next. Skyler is in Charlotte, North Carolina. Hi, Skyler. Welcome to the Entree Leadership Podcast. Good afternoon, Dave. How are you doing today? Better than I deserve.

What's up in your world? Oh, nothing much. I had a question. A little background information. I'm a senior employee at a small company of nine people, and I would say we gross revenue of about $800,000. I don't look at the financial. I haven't yet.

And my question is, should I buy the business from my boss, even if I don't know how to do it the right way or go about it the proper way? Go about running the business the proper way or buying it the proper way, which is that you don't know? Buying the proper way, like going about it the right way. If he walked out today, you could run it. Say it is a good chance, yes. Okay. What would you be the strongest at and what would you be the weakest at if he walked out today and you were running it? My strongest would be the connections, the marketing, the marketing aspect with the clients.

Is that what you do now? No, sir, no, sir, I don't. Okay, what do you do now? I go along with her to the when we go market. Okay, all right. What is your title? What do you actually do? We, real estate.

No, you? Oh, me. I'm in charge of the title abstractors in our business. Okay. And the business is what? Title searching? Yes, sir. And insurance.

Okay. All right, cool. All right. And there's nine of you in your grossing 800K. And you don't know what the net profit is. And I didn't let you finish earlier. What would be your weakest problem, your biggest problem if you took over operations today? My biggest problem would be the delegate.

part. I'm working on that, but I do see that as being my weakest. Okay. All right. So you know how to run the marketing. You know how to run the accounting. You know how to look at the books, pay the bills, all that process, right? You're comfortable with all that?

Yes, sir. Good. Very good. All right. Well, has she given you a price? No, sir. She has not. The last thing she's told me was that she's ready for me to look over the financials,

and I'm currently in talks with a – I'm interviewing a couple of CPAs to get them to figure out which one I want on my side for them to look over the financials. But no, as far as price, she has not given me one yet. Okay. Right. And if she sells you the business and leaves, what will it cost you to hire someone to do what she does now or do what you do because you're going to be doing what she does? Or would you even replace that? I would replace her and it would probably be probably about 50 to 60K a year. Okay. All right, cool. So what I would tell you to do then the formula, let's talk.

about first is the actual net profit of the business if she's paying herself out before that net profit then you would add that back in since she's leaving but then you would subtract out 60,000 okay because you got to so when the smoke clears she's gone and you've and you've replaced this 60,000 dollar position what will your net profit be that's the figure you're looking for you follow me yes sir okay and then we we're going to take that figure times four or five. Okay.

And you're going to be real close to your valuation. Okay. That's a 20 to a 25% rate of return, which is ridiculous for an investment, but not ridiculous for a high-risk purchase like a small business. Yes, sir. Okay. And so that's a standard. That's called a cap rate valuation.

It's a standard valuation method in small business settings. And so I'd like to pay her about four times. that net profit figure after we've ascertained what it is minus what she's paying herself now, plus, I mean, plus that minus the 60 and coming up with a real net profit after she's gone. And so if that's 100,000 a year out of the 800, which I'm going to guess and say that's probably not that far off, then this is a $400,000 business. Okay. Follow me?

Yes, sir. Okay. And what you're getting paid does not enter into the equation because we also have to pay you. Yes, sir. So the way you analyze it when you're buying is if you were an absentee owner. In other words, if I bought the business and I hired you to run it and that other $60,000 person and she was gone, what would I be netting? And I live in Nashville and you're in Charlotte, okay? And so, because you guys are going to be running it, but what's the net profit after I pay all my employees if I buy the business?

That would make that business if it's $100K worth around $400 to me, which is a 25%%% rate of return. That'd be the minimum I would look at. So now, how do we get, how do we structure that deal? Well, a lot of people do stupid stuff like run down to the bank and take out a second mortgage on their house with an SBA loan and get $400,000 in debt. No, don't do that. Right. If that's the only way she'll take her money, you don't do this deal. You're just going to have to not do the deal. I would walk away. And we've talked about the seller finance because we've talked about briefly. Okay, here's your structure for the seller finance. What do you make now? Me right now, I make about 65 to 70.

Okay. You're going to pay yourself 70,000, and you're going to give her 100% of the net profit until it reaches 400. Okay. And if there's not any net profit that year, because there's a COVID pandemic, then you don't know or anything that year. It's net profit after you get 70,000,

whatever that figure is, until it gets to 400, 400 is the number. You follow me? Yes, sir. And so if it makes 100 a year, four years you paid her out. Yes, sir. If you do four times net profit, and the net profit stays exactly the same in four years you'll pay her out. If you do five times net profit, in five years you'll pay her out. But likely your profits are going to be better or worse than they've been in the past. Hopefully, you'll do a slightly better job or maybe a little worse job because you're new at it. I don't know. But either way, you're not on the hook for some stupid bank payment and you lose everything because something went sideways and you borrowed up to your eyeballs to buy out a title business. Yes, sir.

Don't do that. Don't do that, okay? Yes, sir. So the net profit formula is really easy. She gets everything after you get your basic salary until she gets all her money. That's a great deal for her as long as there's profit. but it's a great deal for you because if the profits go down, you're not strung out to dry. You follow on me how this works?

Yes, sir. Very cool. Hey, good job. I hope this works out for you, man. You're doing great stuff, and I'm excited for you to be a new business owner. Hope it works through for you. And that's a good deal as an owner financing structure for any of you selling a business, you know, minimum living wage for the new buyer out of the formula. and the net profits left over after that, you get all of it until you get your money,

or most of it until you get your money, whatever the number is. This is the Entree Leadership Podcast. This is the Entree Leadership Podcast. I'm your host, Dave Ramsey. Thank you for joining us, America. This is a real business podcast by real business people answering real questions for real business people. No fake stuff here, no theory stuff here, no college professors here. Not mad at you if you're a college professor,

but if you've never made payroll, your opinion on business doesn't mean spit. It's not the thing. If you hadn't actually done it, listen, it's a thing. It matters. So our phone number here, if you want to join us and be part of the program

is 844-944-1070, and you can leave a voicemail, and we'll get you set up as a caller on a future show. Thank you so much for joining us. Jake is next. to Jake is in Illinois. Hi, Jake. How are you?

Hey, good to be speaking with you, Dave. You too. What's up? So my question is, what do we do with the net revenue of our business? To give you a little background, my family own and operates a couple grain elevators in this area. Dad owns the lion's share of the business. I have some aunts and uncles that own a minority share along with myself. Okay.

So your dad's in control. so you're going to be advising him with what I tell you. Yes. Okay. And how much net profit is there? So that just depends on the year. Last year we were about $100,000 net. The year before, we were about $400.

We typically range between $350 and $450 over the last five years. Last year sucked, huh? Yeah, grain market inverted, and it's hard to make money as a grain elevator when the market flips like that. So we're just happy to be above zero. Yeah, I hear you. I hear you. Okay.

And so does the profit number, have you already calculated before you get to that profit number, some reinvestment back into the business for growing the business or replacing equipment or anything like that? Is that all built into this or do we need to set money aside for those things before we talk about the rest of it. So I think my dad would say we do. I would argue we don't. Having actually run the equipment every day,

you know, our newest truck is a 2000 and our newest skitt steers of 95, and we're getting to the end of the life of things, and we just don't seem to replace it because that's where my head is on this, is to reinvest back, but I just don't know the balance of, I mean, you spoke a lot about the risk we take

and how much we should be taking home, and all that, I just don't know what to do here. Okay. Well, we have to keep the business operating, and the equipment is not there for prestige, so I really don't care what the year is. I care about the functionality and the life left in it. And so whatever the least expensive equipment that will get the job done is the equipment I want to use, because everything else is just showing off.

I'm not trying to show off with my skid steer, for God's sakes. Right. So I just want a skittsterer that does the job. And so now, if you're, you know, if the thing's old and it's worn out and it's laying down more than it's standing up, then, you know, we got a problem because we can't get our work done. Now we got a business function that's blowing up because of a piece of equipment. So the balance is, is not to always keep new shiny equipment that everybody's impressed with, but to keep the minimum equipment on board that will continue to get the job done. And getting the job done means a level of reliability and a level of sophistication of the equipment. And so, you know, in our world, our skid steers are computers.

And so, let me tell you about computers. The day you take them out of the box, they're already obsolete. Yes. You know? And so we're constantly re, we have a line item in our expenses for constant technology upgrades. And it's not because we want the newest or the fanciest or we, give a flip about what someone thinks about our computer. We just are in the broadcast and computer and network world,

and we've got to have stuff that gets the job done. And so we're constantly reinvesting into that. So all of that to say, you and your dad need to sit down and go, okay, what about this whole truck? Are we going to take it out? You know, you really need a systematic line item. It says every five years we're going to buy a truck, every eight years we're going to buy a skid steer or whatever it is.

And so you take the cost of a skid steer divided by eight, if that's the number. And if eight years is the number, put that in the line item, and you start setting aside what we call a sinking fund, returning to earnings to replace systematically replace equipment on a schedule. And you do that in real estate with a roof. A roof only has so many years of life, as an example. And so we do that with equipment.

With me with a computer, it's about a year. You know, dadgum thing's just useless. Stupid iPhone, the same thing, right? and the differences in what a new one will do versus one five years ago will do is are astronomical. So it's just, it's mandatory to go there. So anyway, all of that to say, now then we've got net profit. And then the only thing you've got to keep net profit for past that is for cash flow fluctuations in case you have a year that goes negative or for growth.

We have the opportunity to buy out another granary. We have the opportunity to add another, whatever it is, silo that gives you volume, right, or whatever it is. I don't know how your world works, but I'm making stuff up. But you follow me. How are we going to grow the business? We need $100,000 bucks to grow the business to add this whole thingy over here.

And so we got to ascertain what that thing costs and how we're going to get there. And all of that gets done within reason before we start taking a bunch of money home. And then we take it home. Okay. But I talked to a guy the other day, he's running a fifth generation, family business with a bunch of cousins that are, he's the CEO and the cousins are all, and the uncles and aunts and whatever, third and fourth cousins, however, it works five generations in, right?

They're all stakeholders like your aunt and you and that kind of thing. And he said, and they're in a very high growth business that is requiring heavy reinvestment, and they've not paid a dividend to the stakeholders in five years. in other words, 100% of their profits have been rolled back into growing the business and upgrading equipment and moving on. So that's a possible scenario for you and your relatives, that there's not any distribution. There's not a requirement morally or ethically. The thing we have to do is keep the goose that is laying the golden eggs, the business, we have to keep it healthy. That's the primary.

After that, then we start distributing to stakeholders and aunts and uncles and minority shareholders, and that kind of stuff. But we're going to do what's right for the business. And now, I'll tell you this. Also, the flip side of that is, eventually you need to start taking some money out of the thing. Or there's no point in running it. If all it does is eat money, then there's no point in running it. Now we're running a hobby.

It's not really profitable. So at some point, the investment needs to turn and create return so that, you know, so that there is a distribution. five years and not getting a distribution means that I'm really, but he thinks he's putting money in the bank with that guy. He thinks he's putting money in the bank. There's going to be dividends that pay. The stuff he's doing now is going to pay big in the following five years. So that guy, that other CEO I was talking about. So yes, let's replace systematically line item in the budget, replace equipment, and no, there's not an ethical requirement for profit distributions. But it is

the reason we want to own a business is to create profit distributions. So at the end of the day, that has to happen too. So there's this balance, this dance that we go in between the two. And so these days around Ramsey, we're at the point that we have heavy profit distributions, even though we have heavy reinvestment. But, you know, the size of the business and the amount of money is different than it was in the old days when we were scratching and clawing a little bit more than we are today. This is the entree leadership. podcast. This is the Entre Leadership Podcast. We're glad you're with us. Thank you so much for joining us. If this is helpful to you, please follow the show. Click the follow button, subscribe button.

Leave us a nice five-star review. One-stars aren't helpful. Mama said if you hang anything nice to say, don't say anything at all. Share the show. Share a link or click the share button. Likes, shares, subscribes, all these things help us because they let other people know that the show is moving the needle for you. And it causes the algorithms on the old podcast world and the YouTube world to work. And more people then find this. So thank you for subscribing, sharing, reviewing, liking, all those things. Do all of it.

Do all of it. It's your only marketing hope. Jen. Jen is with us in Delaware. Hey, Jen, what's up? Hi, Dave. Thanks for taking my call. Sure. How can I help? My husband and I are doctors of physical therapy with 17 years experience, and we opened our own private practice in July of 2019.

We started with one location with just the two of us, and we now have two locations, seven full-time employees, and a couple part-time college student employees. Wow. Our plan is to grow to four clinic locations, but since we are an insurance-based company, it's been very difficult for us to save money to. move forward with that because it seems that reimbursements continue to decrease. So I was curious if you had any suggestions on how we could maybe budget better for growth when our reimbursement is unpredictable, seems to always decrease and can be delayed sometimes weeks or months from the time of service. Decreased.

You mean they're paying you less? Yes. Well, at what point do they pay you little enough that you no longer deal with them? Well, unfortunately, 60% of our patients are Medicare, and we don't have a lot of bargaining power with the government on that. No, you don't. But the only bargaining power you have is get out of that part of the business if they make it unprofitable. And I know lots of docs that have. Right.

That's why I'm asking. At what point do they lower this so far, the insurance claim or the Medicare claim, they lower it so far that it makes it not worth doing. Well, I guess if we got below that, at least break-even number, we're probably about 10% margin with them. Yeah, health care stuff. No, it's not just health care stuff. It's business model stuff.

So this is what's driving stuff like concierge medicine. You know that, right? Right. And we do have some people in our area that do do a cash-based service. I just don't know in the area that we live in if that would be something that we could live off of. Well, you can't live off of no margin. I mean, if you're losing 20 cents a watermelon, you don't want to get a bigger truck. Right.

So, I mean, we've got to think this through. I'm not saying you're there today, but what you're describing is you're trying to get more and more of the kind of customers that you don't like. Right. we have dropped some of the lower paying insurances, the private insurances that were starting to pay us less than what it cost us to treat a patient. So we have dropped those. Yeah, you have to. Because, yeah, we just can't treat them. And luckily for us, it was a very low percentage of those patients that we did have on our caseload.

Exactly. And we offer them for out-of-network benefits. Yeah. So that is an option that we've gone to. Unfortunately, a lot of Medicare people are on a fixed income, so they don't have that option. of being out of pocket. They'll just go somewhere else. Exactly. And that's the government's problem. It's not yours. You have a business model problem. Okay. You're not running a nonprofit. And so you don't have a choice in this. I mean, I love your compassion. And it makes your heart sad, makes mine sad too. But you can't destroy your ability to stay open because we're sad over this group of people over here on the side. And so, yeah, you have to drop those when they're unprofitable. It reaches a point.

And Medicare may reach that point. It has in other parts of your world, not necessarily PT, but where you are, but other parts of the medical world, people are just abandoning it because it's not worth screwing with. And again, if the margins get so tight, it's not healthy growth. Let's say that your mix went to 80% Medicare instead of 60. But you could grow six stores instead of two, right? You don't want that. Mm-hmm. You don't want that because now you're done,

you've built a whole network of stores that are dependent upon a dying profit margin. Does that make sense? Yes, absolutely. And so the more I can move, if I'm you, if I grow the stores slower, but I can get moved my mix to less and less of the low margin mix, then the better off you're going to, the more stable you're going to be, the more you're controlling your own destiny. And so I would rather have three stores than six that are highly profitable and that, you know, we're doing good volume in them.

But the mix is not, the mix might be 60, might be 40% Medicare and 60% the other rather than the other way around. Because you're moving in a direction then that allows you to do that. So that's what I would do if I woke up in your shoes. because what you're describing here is a revenue variable that you can't control. Sure. And really have zero impact on. And so they can come along and just change it unilaterally. And then you're just screwed, you know.

And we're finding that even with private insurance. Exactly. And they've got high deductibles and, you know, people just can't afford. You know, they kind of look at PT sometimes as a. a luxury that, well, maybe I could just get by without it so they don't because they can't afford to come in and pay cash. Yep. Yep.

And so, yeah, you know, A, that creates a different marketing thing where you say, okay, we have to convince you that this is important to get your money, you know? Right. Because it is important. It's a valid service. I'm not being sarcastic about it. But, you know, instead of I'm coming over here because it's free and my doctor told me to come, it's free to me, but my insurance company's paying for it.

Now I've got to actually have some skin in the game, no pun intended. Sure. And, you know, and now I've got to actually decide if PT is valuable. Now you've got a different client interaction that involves a value proposition. You have to show them that you're valuable, not just, oh, they come in and it's a no-brainer. Doc told me to come. What do I do? Okay, do that.

Do that. Okay. And you walk through, you know, your process. So, you know, you may be moving more of a privatized. thing. So an example of that, again, I referred to it earlier. I've got several doc friends that have gone to concierge. And, you know, they have to have a value proposition. I've got a, I've got a, personally have a concierge doc. And the value proposition is obvious for me. It's convenience. You know, I can pick a, and it's instant service and thorough service. And I can afford the, I'm a, you know, a high-income earner. I can afford to do that. And, but the value proposition can't simply be

you're going to sit in a waiting room for six hours and wish I knew how to do my scheduling. You know? Right. I'm not playing that. Not for any amount of my. As a customer, I'm not. So it's a different world, and then you've got a different discussion with your customer at that point. So, yeah, I think what this is forcing you to do is that volume might not be your answer on stores as much as addressing your product mix on the stores.

that might be the way you go. That's just looking at it from the outside. I'm almost looking at it from a customer's perspective. I mean, I've done some PT from time to time. And I do value what you guys do personally. So, you know, yeah, you're a hero. Appreciate what you do and I appreciate the way you guys are looking at it. But it could be that the shifting private insurance market

and the shifting Medicare market is telling you less volume, higher margin is a better model than high volume, low margin. that you can't control the revenue stream. And that's your mix. That's a philosophical product mix decision you've got to make. And then what are the unintended consequences of that? And it could be one of those is you have to learn to sell PT rather than just do PT. You have to teach the client that why it's valuable, in other words.

So they do give you their money. Because otherwise they're giving you the government's money or the insurance company's money and they don't give a rip. That's a different transaction. So what are the other unintended consequences? I don't know what they are. I think one of the positive ones is you're going to have increased cash flow because all your payments aren't delayed. They're cash on the barrelhead.

And that's the direction that you go. So really, really good stuff. Hey, guys, that's a good, solid 47 minutes of podcasting or something like that. Somewhere around there. We're glad you're here. Hey, remember, better a weary warrior than a quivering, critic. Leaders serve. Leaders are active. They're not passive. Leaders act on principle, not appearances.

This world needs more high-quality leaders. So choose to lead. I'm Dave Ramsey, your host. Thanks for listening to the Entree Leadership podcast.